9 High-Yield Stocks to Consider in Lieu of Bonds

BOSTON ( TheStreet) -- Investors seeking the security of Treasury bonds in fear that Europe's ongoing economic woes will spread are getting the lowest yields on the 10-year note in almost 70 years.

But those investors are missing out on much more attractive alternatives that don't have a significantly higher degree of risk.

They are high-yielding stocks of top-notch companies that have a good chance for share-price appreciation when the market regains its equilibrium.

In order to find some of the best of them, I screened the Morningstar database for high-yielding stocks of companies with market values of at least $5 billion and financial fundamentals that put them among the best in their industry, which means their futures are sound.

I found five in this elite group with dividend yields more than three times that of the record low 1.53% rate being paid by the 10-year Treasury on Thursday and four others that are paying better than 4%.

One shining example is Southern Copper ( SCCO), a copper producer with the world's largest mine reserves.

Its shares currently yield 7.06% and have returned 32% annually on average over the past decade. Sure, the metals market, along with Southern Copper's shares, are on a constant roller-coaster ride, but given that this company had $1.4 billion in cash versus only $2.7 billion in debt at the end of 2011, it's in a lot better financial shape than many European countries right now.

Two other interesting picks are from Canada, a nation that has weathered the recession in better shape than the U.S. due to the fiscal conservatism of its banking system.

One, Rogers Communications ( RCI), with a yield of 4.21%, is Canada's largest wireless voice and data communications services provider as well as its biggest cable television provider, this in a country that is several years behind the U.S. in terms of cell phone and cable TV penetration rates. So it has plenty of room for growth.

Rogers' bonds get investment-grade ratings and last year it repurchased about 31 million shares under a buyback plan that is still in force this year.

Another winner from up north is a young real estate investment trust (REIT), Riocan Real Estate Investment ( RIOCF), Canada's biggest retail REIT. It owns and manages shopping centers.

It's in a great position for growth as the struggling Sears Canada ( SEARF) is expected to sell off some of its plum store locations, just as U.S. retailers, such as mass market retailer Target ( TGT) and upscale clothier Nordstrom ( JWN), are keen to enter Canadian urban markets.

Here are summaries of nine, high-quality companies' stocks with current dividend yields over 4% and positive long-term prospects arranged in inverse order of dividend yield:

9. Rogers Communications ( RCI)

Company profile: Rogers, with a market value of $18 billion, is Canada's largest wireless voice and data communications services provider and its cable and telecom division is Canada's largest cable television provider, along with offering high-speed Internet access.

Dividend Yield: 4.21%

Investor takeaway: Its shares are down 11% this year but have a 15-year, average annual return of 19%. Analysts give its shares three "buy" ratings, five "buy/holds," 10 "holds," and one "weak hold," according to a survey of analysts by S&P. Analysts estimate it will earn $3.13 per share this year and $3.30 next year, or 5% growth.

8. Paychex ( PAYX)

Company profile: Paychex, with a market value of $11 billion, provides payroll accounting services to small and medium-sized businesses throughout the U.S.

Dividend Yield: 4.22%

Investor takeaway: Its shares are up 2% this year and have a 15-year, average annual return of 9%. Analysts give its shares three "buy" ratings, four "buy/holds," 16 "holds," one "weak hold," and two "sells," according to a survey of analysts by S&P. Analysts expect it will earn $1.52 per share this year and $1.64 next year, or 8% growth.

7. Riocan Real Estate Investment ( RIOCF)

Company profile: Riocan, with a market value of $7 billion, is Canada's largest real estate investment trust exclusively focused on retail real estate. It owns and manages a large portfolio of shopping centers.

Dividend Yield: 4.46%

Investor takeaway: Its shares are up 0.3% this year and have a one-year annual return of 3.7%. Morningstar found three "buy" ratings and two "holds." BlackRock Asset Management Canada Ltd. owns 4.5% of its shares.

6. Lockheed Martin ( LMT)

Company profile: Lockheed Martin, with a market value of $27 billion, is the largest defense contractor in the world and is the undisputed leader in next-generation fighter aircraft development.

Dividend Yield: 4.53%

Investor takeaway: Its shares are up 4.8% this year and have a 15-year, average annual return of 5.4%. Analysts give its shares two "buy" ratings, one "buy/hold," 16 "holds," two "weak holds," and two "sells," according to a survey of analysts by S&P. Analysts expect it will earn $7.88 per share this year and that that will grow by 7% to $8.42 per share next year.

5. Eli Lilly ( LLY)

Company profile: Eli Lilly, with a market value of $48 billion, is one of the world's largest pharmaceutical companies, with a focus on neuroscience, endocrinology, oncology, and cardiovascular therapeutic areas. The company faces the challenge of a number of its patented drugs going to generic status over the next few years. However, it has many new drugs in its pipeline.

Dividend Yield: 4.78%

Investor takeaway: Its shares are up 1% this year and have a 15-year, average annual return of 2%. Analysts give its shares three "buy" ratings, 16 "holds," one "weak hold," and two "sells," according to a survey of analysts by S&P. Analysts expect it will earn $3.27 per share this year, and grow by 13% next year to $3.69 per share.

4. Altria Group ( MO)

Company profile: Altria, with a market value of $65 billion, is the largest U.S. cigarette maker. It spun off Kraft Foods in 2007 and its international cigarette operations in 2008.

Dividend Yield: 5.03%

Investor takeaway: Its shares are up 9.4% this year and have a 10-year, average annual return of 13%. Analysts give its shares four "buy" ratings, four "buy/holds," and eight "holds," according to a survey of analysts by S&P, which itself has it rated "buy."

3. ConocoPhillips ( COP)

Company profile: ConocoPhillips, with a market value of $66 billion, is the second-largest integrated U.S.-based, international oil and gas exploration and production company. It recently spun off its Phillips 66 unit to focus on its core growth potential.

Dividend Yield: 5.07%

Investor takeaway: Its shares are down 4% this year, but have a 15-year, average annual return of 10%. Analysts give its shares three "buy" ratings, four "buy/holds," 10 "holds," one "weak hold," and three "sells," according to a survey of analysts by S&P. S&P has it rated "buy."

2. AstraZeneca ( AZN)

Company profile: AstraZeneca, with a market value of $51 billion, makes drugs including Prilosec for indigestion and Accolate tablets for respiratory problems.

Dividend Yield: 6.93%

Investor takeaway: Its shares are down 8.5% this year but have a 15-year, average annual return of 5%. Analysts give its shares one "buy" ratings, two "buy/holds," five "holds," and one "weak hold," according to a survey of analysts by S&P. Analysts expect earnings of $5.92 per share this year, and $6.07 per share next year, a 3% increase.

1. Southern Copper ( SCCO)

Company profile: Southern Copper, with a market value of $24 billion, is the world's largest copper miner. Copper prices are volatile and are now near a cyclical high. Putting it in a nearly impregnable position as the industry leader, the company has a reserve "equivalent to over a century of output based on 2011 production volumes," Morningstar says.

Dividend Yield: 7.06%

Investor takeaway: Its shares are down 1.5% this year but have a 10-year average total return of 32%. Morningstar analysts say: "Three variables are likely to dictate Southern Copper's long-term fortunes: the price of copper, the success of expansion projects in Peru and Mexico, and management's ability to maintain amicable labor relations."
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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